SAN DIEGO ALERTS WALL STREET OF $4B STORMWATER COSTS

California’s quest for clean water is about to get very, very expensive.

Last week, San Diego officials alerted Wall Street that regulations designed to scrub pollution from urban runoff could cost $4 billion over the next 17 years.

For perspective, the city’s infamous unfunded pension liability was $2.3 billion in June 2012, according to the most recent actuarial report. San Diego’s total revenue last year was $2.75 billion.

And this $4 billion liability represents just the government’s cost estimate. Businesses and consumers will spend untold billions more, for everything from giant cisterns to catch stormwater, to new irrigation systems, to fines and even possibly jail terms for failing to prevent pet poop bacteria from reaching storm drains.

It’s hard to find anybody who doesn’t care deeply about cleaning up our rivers and beaches. Yet scientists say government and industry has solved 95 percent of our water-quality problems, mostly by improving sewage treatment and through previous runoff regulations.

Now we’re entering a realm of soaring costs for rapidly diminishing returns. For example, a 2009 paper by the Environmental Protection Agency questioned whether reducing animal bacteria will have any effect on improving human health or the aquatic environment.

Nobody really knows the price tag of California’s new standards, which some experts say are impossible to meet at any cost.

San Diego’s $4 billion forecast was prominently disclosed Feb. 11 in its comprehensive annual financial report, a document that bondholders and other lenders use to assess creditworthiness.

Although I’m assured by officials that the city’s cost estimate is backed by careful analysis, history suggests an impulse toward really full disclosure is wise.

After all, San Diego’s failure to disclose true pension costs in the early 2000s blew up its access to credit and incurred the wrath of the Securities and Exchange Commission. It makes sense that the former “Enron by the Sea” would rather be viewed as “Oprah by the Sea” by the bond market.

Soon ratepayers will need a shoulder to cry on.

Rates must rise 1,000 percent for the stormwater portion of residential and business utility bills in San Diego, according to an October report by the city’s independent budget analyst. That’s just to cover increased costs over five years.

Granted, stormwater costs are low now; they’d rise from 95 cents to $11.14 per month for a typical residential customer. But that percentage jump would hurt many companies.

And $642 million will pile on top of the $900 million or so in badly needed infrastructure capital that figured prominently in the recent mayoral election.

Democrats on the City Council have proposed borrowing the money instead of raising taxes. My economics textbook taught that government borrowing is treated as a future tax hike by businesses and consumers, who alter financial plans accordingly.

Mayor-elect Kevin Faulconer has said the city can squeeze $900 million from other spending without borrowing or new taxes.

Last week, Faulconer told me he wants to rally shellshocked cities to lobby state lawmakers for regulatory relief. He will need all the help he can get; state officials say their hands are tied by court rulings interpreting the federal Clean Water Act.

Other cities face similar costs. County officials last year estimated new costs of up to $5.1 billion for the region; San Diego’s portion was $2.7 billion.

This impending spending frenzy was dialed into law last year by the Regional Water Quality Control Board, a state agency that regulates water quality. The agency set numeric targets for levels of bacteria, dirt and chemicals permitted to flow into creeks and the ocean when it rains and during dry weather.

In most cases, the runoff must have bacteria readings similar to those of the Arroyo Sequit, a pristine watershed in the Santa Monica Mountains that represents San Diego before Juan Cabrillo sailed into the bay in 1542.

To say these standards are practically impossible is to understate the case.

At a May 8 hearing, a county expert showed that Arroyo Sequit routinely violates the agency’s new standards for San Diego County, a sprawling paved metropolis covered in trace amounts of bacteria, dust, fertilizer residues and pet droppings.

Agency officials didn’t dispute the expert. One said, “We need to set the bar high,” echoing environmental groups who said governments need to be forced into action. If the standards are wrong or impossible, they can be adjusted later, they said.

To their credit, state regulators are showing flexibility and open minds as local governments work on watershed plans before a June 2015 deadline, according to my conversations last week with city officials, builders and environmental engineers.

However, the numeric limits are now the law of the land. Although regulators gave cities two years to craft compliance plans, the rules took effect last year, leaving the door open to lawsuits whenever an enterprising lawyer decides progress is lagging.